The Rise of ConservativeCapitalism: Ideological Tensions within the Reagan and ThatcherGovernments KENNETH R. HOOVER Universityof Wisconsin-Parkside The phrase liberal capitalism has occasionally been used in contemporary political criticism to lump togetherthe ideological approachesof nonsocialist political parties and to suggest that there are few significant differences among those who generally supporta market-basedpolitical economy. C. B. Macpherson,in an influential essay entitled The Real World of Democracy (1965), arguesthat "by admittingthe mass of the people into the competitive party system, the liberal state did not abandon its fundamentalnature; it simply opened the competitive political system to all the individualswho had been created by the competitive marketsociety."' As a first approximation then, liberalcapitalismappearsto standfor a combinationof rationalcontractualism, utilitarianindividualism, and the laissez-faire economics of Adam Smith. With the rise to power of Prime MinisterMargaretThatcherand President Ronald Reagan, a considerable cleavage has developed among those who supportcapitalism. Reagan and Thatcherhave assembled a rationale and a series of policies for what I will identify as conservative capitalism. Rather than dealing incrementallywithin a general consensus on reformistpolicies, they have reversedthe growthof taxation, shiftedresourcesaway from human service programs,resuscitatedtraditionalistprescriptionsfor personalbehavior, and advancedthe apparentsubstitutionof the marketfor governmentas the key institutionof the society. There are foreign policy implicationsof this development, though they are beyond the scope of this article. This article is based in parton a paperpreparedfor the XIII WorldCongress of the International Political Science Association, Paris, July 1985. I would like to thank Norman Cloutier, Mark Kann, Thomas Moore, and Raymond Plant for their suggestions in writing this article. I C. B. Macpherson, The Real World of Democracy (London: Oxford University Press, 1965), 11. More recently, the discussion of "liberal democraticcapitalism" has been at the heart of attemptsto revise Marx's theory of the state. See Samuel Bowles and HerbertGintis, "The Crisis of Liberal DemocraticCapitalism:The Case of the United States," Politics and Society, 11:1 (1982), 51-93. 0010-4175/87/2205-0302 $2.50 ? 1987 Society for ComparativeStudyof Society and History 245 246 KENNETH R. HOOVER While some criticaltheoristsmay have minimizedthe contributionof liberal social ideals to the ameliorationof the inequalitiesproducedby capitalism, the Reagan-Thatcherpolicies make it quite clear that conservativecapitalism is indeeddifferentfrom the liberalversion, particularlyfrom its contemporary "reform liberal" variant. Modern liberal reformers and social democrats believe that all people are entitled to the prerequisitesfor competition in a market society. The disadvantagedshould, by governmentalprograms and regulations, be given the means of competing: education, health care, job training, the right to bargain collectively with management, freedom from various forms of discrimination, and protection from the abuse of power, whethereconomic (as in job safety and environmentalprograms)or political (as in civil liberties). These forms of governmentalinterventionplus Keynesian economics make up the core of liberal capitalism. This programis to be distinguishedfrom socialism (thoughsocialists have often supportedits policy initiatives)by the prohibitionof a directgovernmentrole in the ownershipand control of the means of production. Samuel Bowles and HerbertGintis, in their analysis of liberal democratic capitalism,disagree with those on the Left who dismiss the reformisttendencies of liberals.2They go on to point out that conservativeshave (accurately) viewed liberalreformismas a regulatorof class conflict, as well as an inhibitor of free enterprise.I will argue that these two aspects of the conservative view express different tendencies that lead to significant policy conflicts within the conservativecapitalist movement.3 What, then, is conservative capitalism?The capitalistelement is apparent in the plain preferencefor the marketas an allocatorof values. What is not liberal is the move away from policies aimed at furtheringequal opportunity throughgovernmentintervention.What makes these approachesconservative is morecomplicatedand requiresexplorationof the split within contemporary conservatism, an assessment of the political backgroundsof the key actors, and an ideological analysis of their policies. We will use, as an illustrative case study, the struggle over PresidentReagan's New Federalism proposal and its partialimplementation,along with examples of similarconflicts over 2 Bowles and Gintis, "Crisis of Liberal Democratic Capitalism." The phrase democratic capitalism has been avoided here largely because it is used for quite different purposesby Left and Right. On the Left, the phrase is an entry into the argumentthat democracy has altered capitalismin fundamentalways and that the currentstruggle is over the reassertionof capitalist control over democracy. This position is summarizedin Robert Alford, "The Reagan Budgets and the Contradictionbetween Capitalismand Democracy," in The Future of AmericanDemocracy: Viewsfrom the Left, MarkKann, ed. (Philadelphia:Temple University Press, 1983), 2253. On the Right, conservativessuch as Michael Novak use the phrasedemocraticcapitalismto convey a quite different message: that democratic political norms legitimize the inequalities producedby the economic resultsof capitalism. TheSpiritof DemocraticCapitalism(New York: Simon and Schuster, 1982). 3 Novak, Spirit of Democratic Capitalism, 52-53, 60. RISE OF CONSERVATIVE CAPITALISM 247 policy within the Thatchergovernment.From this we can begin to compose a pictureof the dynamics of conservative capitalism. The objective is to determine what this ideological split means for the future of conservative capitalism. The analysis of these strainsmay be predictivefor other expressions of contemporaryconservatismthroughoutEurope.4In the conclusion, I will suggest aspects of the interplayof class, personal identity, and ideology that account for some of these tensions within both the liberal and conservative versions of capitalism.5 CONSERVATIVE IDEOLOGY: THE LIBERTARIAN-TRADITIONALIST SPLIT The terminologicalparadox is that conservatism, a philosophy based in precapitalist society and historically at odds with capitalism's development, is now seen as the primary defender of the capitalist market society. In the course of the analysis, we will see thatthis is not so much a transformationas the developmentof a rival inclination. Conservativecapitalismis a hybridof these rival tendencies. The competition between them has, at times, endangeredthe programsof both the Reagan and Thatchergovernments. While there is division within conservative capitalism on major questions concerning the role of the state, both tendencies begin from a sense of the limits of humannatureand an acceptanceof inequality.Whereliberalssee the rationalindividualcapable of contractingwith others for the mutualimprovement of the human condition, the conservative sees a spiritual, fallible, limited, semirationalpersonalitywhose behaviorcannot be improvedby reason alone. Ratherthan using the state to move such creaturestoward procedural equalityand abstractjustice, the conservativeconcern is to providethe appropriateenvironmentfor the nurturanceof the particularstrengthsof each personality. From this analysis of the human condition, which is what unites conservativesof all kinds, flow two divergentstreamsof thoughtabout what the role of the state should be. George Nash has labeled these two conservative variantsas traditionalistand libertarian.6Nash's terminologyis faithful 4 For a survey of these expressions, see Geoffrey Smith, "European Conservative Trend Growing," Institutefor Socioeconomic Studies Journal, 9 (Summer 1984), 49-57. 5 The claim here is not that ideas cause events. Rather, it is similar to that made by Trygve Tholfsen in Ideology and Revolutionin ModernEurope:An Essay on the Role of Ideas in History York: ColumbiaUniversityPress, 1984): unlike the extrinsic relationsthat govern physical (New nature,humansociety is influenced by intrinsiclogical and conceptualrelationsthat are embedded in antecedenttraditionsand beliefs-among the most powerful of which are political ideologies. See Tholfsen, 2-3. Where causation lies cannot be determined;where influence lies is explored in studies such as that undertakenhere. 6 George Nash, The ConservativeIntellectualMovementin America: Since 1945 (New York: Basic Books, 1979), 81-82. Cf. the distinctionbetween organicand individualistconservatismin KennethDolbeare and PatriciaDolbeare, AmericanIdeologies: The CompetingPolitical Beliefs of the 1970s (Chicago: Rand McNally, 1976), 56-71. 248 KENNETH R. HOOVER to the historicalsources, if not as colorful as Drys and Wets, or Diehardsand Ditchers.7 The traditionaliststream follows from classical natural-lawdoctrine and the organic-societyconceptions of EdmundBurke, while the libertarianstream follows from the niileteenth-centuryutilitarianismof the Manchester liberals as recast by Ludwig Von Mises and FriedrichHayek. Libertariansbelieve in individualinitiative;the use of governmentalpower to improve an individual's competitive position is immoral.8The libertarian versionof equal opportunityis passive, emphasizingthe absence of obstacles, ratherthan the presence of requisites for individual competition. Equality before the law is thought to be a sufficient guaranteeof equal opportunity. The inequalitiesof the marketplacecannot be criticizedon moral groundsfor the reason that they are nonintentionalin nature.9Libertarianssee a role for government only in protecting the freedom of individual choice from encroachmentby others. Traditionalconservatives see government'srole as the guarantorof appropriate forms of in-equality. The use of governmentalpower to counter the naturalinequalityof people is impracticaland unwise. 10Theirs is the organic view of society in which all of the parts are interdependentand each is to be supportedby appropriateforms of institutionalaction-including governmental supportfor the indigent. Governmentmust act to restrictindividualbehavior that threatensthe maintenanceof the institutionalstructureof the society. Here common cause is made with the "evangelical Right" on a numberof social issues. 7 Robert Behrens locates the fault line in the ConservativeParty between the Ditchers, who have boughtinto the postwarpolitics of statism, and the Diehards, who insist on the "true faith" of the free marketand personalresponsibility.The libertarian-traditionalist distinctiondiffers in assessing the historicaldimensionof this split and its impacton currentpolicy. Traditionalists,in our view, deviate only when they compromise Burke;and the faith of the Diehards, as Behrens allows, is in an adaptationof utilitarianismand laissez faire, not the conservativetradition.Cf. Behrens, "Diehards and Ditchers in ContemporaryConservativePolitics," The Political Quarterly, 50 (July-September1979), 287-88, 292; idem, The ConservativeParty from Heath to Thatcher (London: Saxon House, 1980), 7-9, 39. For terminology used in the analysis of developmentsin GreatBritain, see the distinctionbetween the New Right and the Tory Far-right in PatrickDunleavy, "Analysing British Politics," in Developmentsin British Politics, Henry Drucker,ed. (New York: St. Martin'sPress, 1983), 292-93; the discussion of Drys and Wets in RonaldButt, "Thatcherissima:The Politics of Thatcherism,"Policy Review, 26 (Fall 1983), 3035. Cf. Lon Felkerand RobertThompson, "The IntellectualRoots of Economic Conservatismin the Reagan and Thatcher Administrations," Journal of the North Carolina Political Science Association, 3 (1983), 38-55. 8 Tibor Machan, ed., The LibertarianAlternative (Chicago: Nelson-Hall, 1974), 499. For nuancesin the argument,cf. Nash, ConservativeIntellectualMovement, 16-18, 32-33; and Noel K. O'Sullivan, Conservatism(New York: St. Martin's Press, 1976), 27. 9 For a critiqueof Hayek's argumentin this respect, see RaymondPlant, "Hirsch, Hayek, and Habermas:The Dilemmas of Distribution," in Dilemmas of Liberal Democracies, A. Ellis and K. Kumar,eds. (London and New York: Tavistock, 1983), 45-64. 10 Cf. Nash, ConservativeIntellectualMovement,73; RobertNisbet, Communityand Power (New York: Oxford University Press, 1962). RISE OF CONSERVATIVE CAPITALISM 249 We have seen these ideological tendenciesjockey for position over the last severalyears. I will briefly tracetheiremergenceduringReagan's first termin relationto his policy proposals on income security and the New Federalism, examine some internaldissensions over their implementation,and assess the impactof these policies on the structureof opportunity.We will then turnto the Thatchergovernment, where similar strains may be observed in several dimensions of style and policy. CONSERVATIVE FEDERALISM CAPITALISM AND IN THE UNITED THE STRUGGLE OVER STATES: THE NEW INCOME-SECURITY POLICY The struggle over income security remains at the core of the ideological debate in the United States. The specific question as to whetherthe states or the federalgovernmentshould finance welfare was the pivotal structuralissue of PresidentReagan's 1981 New Federalismproposal. The New Federalism was originally envisioned as a sweeping change in the structureof federal relations involving drastically different budgetarypriorities, the shifting of categorical aid programs into block grants, large reductions in federal regulatoryactivity, the returnof revenue sources to the states, and the establishment of enterprisezones to aid economic development.I When fully implemented, the New Federalismwas to rival the New Deal and the GreatSociety as revolutions in the federal system. Like its two predecessors,this revolutionwas drivenby ideological conviction and powered by the perceptionof widespreadsupportfor change. 2 Yet the revolutionis incomplete. It consists of budgetcuts and programconsolidations ratherthan the whole programof structuralreorganizationenvisioned in the original New Federalism proposal. Whetherthe New Federalist agenda will be completed depends on clearing the hurdle of true structuralchange. Whether that final hurdle can be cleared depends in part on whether the ideological thrustthathas energizedthe movementcan be sustainedin view of internalconflicts between traditionalistsand libertarians. A brief history of Ronald Reagan's association with welfare policy provides essential insights into the conflicts that have shaped income-security policy. The ideological history of the New Federalismreally begins with the CaliforniaWelfare Reform Act of 1971. The centerpieceof Ronald Reagan's governorship,it was a response to rapidlygrowing welfare rolls and to pressure from federal welfare administratorsto raise Aid to Families with Depen11 Richard Williamson, "1980: The Reagan Campaign-Harbinger of a Revised Federalism," Publius, 11 (Summer 1981) 149-50. 12 Structuralreformswere much more popularthanthe cuts in antipovertyprograms.Cf. John Robinsonand John Fleishman, "Ideological Trendsin AmericanPublic Opinion," Annals of the AmericanAcademy of Political and Social Science, 472 (March 1984), 56-60; "Public Receptive to New Federalism," Gallup Report, 185 (February1981), 2-9. 250 KENNETH R. HOOVER dent Children(AFDC) payments to reflect increases in the cost of living.13 Essentially, the approachwas to tighten eligibility, impose a one-year residence requirement(laterstruckdown), simplify the administrationof the law, and raise the benefit levels to those remainingon the rolls. The CaliforniaWelfareReformAct was associatedwith a turnaroundin the caseload of substantialproportions.Some analystsattributedthe change to an improvingeconomy, increaseduse of abortionservices, satiationof the eligible population,and the stringentnew regulationsenforcedpursuantto the law by RobertCarleson, then Reagan's welfare director.14 The Welfare Reform Act was in any event a success by all the criteriaof politics. The importanceof the act for our purposes is that it was conceived by Reaganand Carlesonas their alternativeto the Family Assistance Plan (FAP), a federalguaranteed-minimum-income proposalof the RichardNixon administration. The FAP representedthe culminationof a campaign to get traditional conservatives into a coalition with reform liberals that would place welfare on a national footing along with Social Security as a part of the nation's basic safety net. Daniel PatrickMoynihan, a prime mover within the Nixon administrationfor the proposal, reports that Nixon's receptivity to income securitycame directlyout of a concern for the threat,readily apparent in 1969, of dissolutionof traditionalauthorityin America.15His response, in that respect, mirroredBismarck's in a similar situation.16 While the governorsof other states, faced with similarincreasesin welfare rolls, lobbied for federalizationof welfare, Reagan opened the path to an alternativestate-basedapproach.His success made him a leaderamong libertarianconservativesand those traditionalistswho feared the rise of a welfare ethic. Both the governor and Welfare DirectorCarlesontestified against the FAP before the United States Congress. Reagan was politically the nation's most potentcritic of the proposal, and had a greatdeal to do with its defeat.17 The Nixon White House worriedthat Reagan could use the issue to pose a threatto Nixon's renominationin 1972.18The defeat of the FAP strengthened Reagan's hand as leader of a national conservative movement-a strength derived directly from his involvement in the welfare policy area. For these reasons of political history, conservatives came to see welfare policy as an issue associated with questions of federalism, and Ronald Reagan as the 13 Lou Cannon, Reagan (New York: Putnams, 1982), 174-86. 14 Ibid., 184; cf. Frank Levy, "What Ronald Reagan Can Teach the U.S. about Welfare Reform" (Washington, D.C.: The Urban Institute, 1977). 15 Daniel PatrickMoynihan, The Politics of a GuaranteedIncome: The Nixon Administration and the Family Assistance Plan (New York: Vintage, 1973), 110. 16 Nixon is reportedto have specifically endorsedthe "Tory men, liberal principles" theory of policy innovation.Ibid., 214-15. 17 Ibid., 374-75; ChristopherLeman, The Collapse of Welfare Reform (Cambridge:MIT Press, 1980), 92. 18 Cannon, Reagan, 178-79. RISE OF CONSERVATIVE CAPITALISM 25I policy leader. The issue again became a factorin presidentialpolitics in 1976, when an ill-conceived proposal (similar to the New Federalism) derailed Reagan's campaign for the nomination.19 It is indicative for future policy directions that the California Welfare Reform Act was explicitly an alternative to full federalization of AFDC. When Reaganbecame presidentand proposedhis New Federalism,it was the trade-off of the federal portion of AFDC to the states that was to be the centerpieceof the structuralrevolution in federal relations. Libertariansbelieved that competition between states to lower welfare tax loads in orderto position themselves for economic development would, by the logic of the market, accomplish the policy goal of reducing the availability of welfare. The tax savings would stimulate job-producing investment, thus reducing unemploymentand welfare dependence simultaneously. When it came time to implementthe Reagan program,the issue of income security proved to be the focus of some importantdifferences within the administration.A good deal has been writtenaboutthe split within the White House staff during the first term between the "hard-liners," generally typified by Edwin Meese, and the "pragmatists" identified with James Baker. There are indications, however, that the New Federalism programwas affected by a split that was ideological as much as temperamental.The issue in this split was precisely the matterof federalizationof AFDC. The natureof the split reflects classic tensions between libertarianand traditionaliststrains of conservatism. Two key actors in the New Federalism initiative illustrate these ideological tensions: Robert Carleson and David Stockman. Robert Carleson, formerly the president's assistant for human resources and executive secretaryof the CabinetCouncil on HumanResources, appears at all the crucialstages of the New Federalismdebateand, indeed, of the more controversialinitiatives of the Reagan administrationin Social Security reform, housing policy, food stampprograms,urbanenterprisezones and Medicaid.20More than any other figure on the staff, he invoked the classic themes of libertarianism."Income earned belongs individually to the people who earn it. It does not belong to the state, nor does it belong by rightto any other 19 Ibid., 202-7. 20 See RobertPear, "3 Key Aides ReshapeWelfarePolicy," New YorkTimes, 26 April 1982, p. 12; on AFDC, Linda Demkovich, "Medicaid for Welfare:A ControversialSwap," National Journal, 14 (27 February 1982), 363; on Community Development Block Grants, Catherine Lovell, "CDBG: The Role of Federal Requirements," Publius, 13 (Summer 1983), 94; on hunger, LindaDemkovich, "Hunger in America:Is Its ResurgenceReal or Is Evidence Exaggerated?"National Journal, 15 (8 October 1983), 2051; on Social Security, idem, "Team Player SchweikerMay Be Paying a High Price for Loyalty to Reagan," National Journal, 14 (15 May 1982), 849; on Medicaid, "A Weekly Checklist of Major Issues," National Journal, 7 (13 February1982), 303; and on ending federal programsfor the cities, Francis Viscount and Fred Jordan, "Will Cities' Link to Washington Be Cut?" Nation's Cities Weekly, 4:21 (May 25 1981), 1-2. 252 KENNETH R. HOOVER segment of the population." Welfare should be provided only to those who "because of advanced age or permanentand total disability, are unable to supportthemselves." All others, if not excluded from the system entirely, should be required to work in compensation for their benefits, including mothersof small children.21 Carleson translatesthis preference into an argumentfor local control of welfare. "A welfare system must be designed and administeredat the local level of government in order to tailor the assistance to meet the temporary needs of the community's truly needy in a timely and accuratemanner." If income maintenanceis handled nationally, the result would be "irresistible pressure on Congress to increase the centrally set benefit levels," leading more people to find a way on to the roles, and eventually "the nation's economic system would collapse."22 This analysis accords with the libertarian'sfear of the threatto individualfreedom posed by majoritariandemocracy. Liberalsarguethat there are many dimensionsto inequalityof opportunity. George McGovern, in a response to Robert Carleson's article "Social Responsibility," quoted above, comments, "Regrettably, it [Carleson's] is a philosophyrootedin the HoratioAlger fiction thatachievementis but a matter of will; it is scornfulof all that science tells us aboutthe physical, psychological, environmental,economic, and social factors that can inhibit the realization of humanpotential."23 McGovern'slist of opportunityfactorsis substantial, and it covers the programmaticagenda of liberal capitalism. What differentiatesStockmanfrom Carleson is that Stockman, directorof the Office of Management and the Budget, argued the case for New Federalism'sbudgetaryreformsas preconditionsto makingeffective policypolicy that was to include means-testednational health care and "universal income maintenance." Robert Carleson, by contrast, favored devolution of AFDC and had doubts about the federalization of Medicaid.24 Stockman thoughtthatthe categoricalaid programshaddrainedaway money andpolitical energy that should be going into an over-all rationalizationof federal responsibilities. Budget reductions, programconsolidations, and devolution of the categoricalsare neededto controlthe federalbudget. However, Stockmansaw 21 RobertCarlesonand Kevin R. Hopkins, "Whose ResponsibilityIs Social Responsibility?: The Reagan Rationale," Public Welfare, 8 (Fall 1981), 9, 13-14. Cf. Associated Press, "Reagan Blasts Welfare Programs," 16 February1986. 22 In Claude E. Barfield, RethinkingFederalism (Washington, D.C.: American Enterprise Institute, 1981), 70. Economist Wallace Oates, "The New Federalism-An Economist's View," Cato Journal, 2:2 (Fall 1982), 479, points out that the federalized share of AFDC has fallen, ratherthan risen. 23 George McGovern, "Whose Responsibility Is Social Responsibility?: An Opposing View," Public Welfare, 8 (Fall 1981), 9. 24 In Barfield, RethinkingFederalism, p. 81. RegardingCarleson, see "A Weekly Checklist of MajorIssues," National Journal, 7 (13 February1982), 303. RISE OF CONSERVATIVE CAPITALISM 253 a distinctionbetween these strategieson the one hand, and the need for certain nationalminimumsin the areasof healthand income securityon the other. The federal level should concern itself with "foreign policy, the social insurance systems we run nationwide-Social Security, Medicare and means-tested entitlements-that embody all those fundamentalcommitmentsthathave been made."25 Stockman's position accords with the traditionalconservative argument that society has a commitmentto its dependentcitizens that must be met as a matter of obligation. Programs that attempted to alter the distributionof advantagesin the marketplace,however, were subjectto the budgetdirector's cuts and/or devolution to the states. However, the Reagan deficits meant that any effort to rationalizeentitlements at the federal level would requirecuttingback drasticallyon benefits to those whose claims were, in any way, weak. Stockman learned that weak claims and weak constituencies are not the same thing, and political realities are more significant than fiscal realities. An affordablefederalized Medicaid would exclude many marginal recipients covered under current state programs-and that was politically unacceptable,just as the full assumptionof Medicaid costs was fiscally impossible in view of the deficits. In fact, there is good reason to believe that this dilemma underminedthe New Federalismnegotiationsin the spring of 1982. RichardWilliamson, the president'sagent in the negotiations, remarkedin a retrospectiveanalysis that footdraggingby "certain administrationofficials, whose enthusiasmfor the New Federalisminitiative had dissipated," was responsiblefor the failure to complete the Medicaid-for-AFDCswap. He locates the problemin the Office of Management and the Budget and attributesit to a "senior OMB official. "26 The matterof income securitywas in any event the issue of principle thatcould not be resolved between the governors, both Republicanand Democratic, and the Reagan White House. These differences on the crucial question of federalizationof AFDC are symptomaticof differences on a wider scale of issues. John Kessel, in measuring policy preferencesdisplayed in interviews with Reagan White House staff members, found divisions into "unalloyed conservatives," who think national defense is the only legitimate federal activity, "domestic conservatives," who favor some new domestic programinitiatives, and "lenient conservatives." The differences among these groups are not great, but it is 25 Quoted in James Reston, "Discussing the Bugs in the Machinery," interview with David A. Stockman,New YorkTimes, 12 April 1984, p. 12. Cf. Barfield, RethinkingFederalism, 82. 26 RichardWilliamson, "The 1982 New Federalism Negotiations," Publius, 13:2 (Spring 1983), 27-28. On weak claims, weak clients, and the role of political constituencies, cf. William Greider's commentary in "The Education of David Stockman," The Atlantic Monthly (December 1981), 30, 51-52; David Stockman's apology for the deficits, The Triumphof Politics (New York: Harperand Row, 1986), 124-27, 408-10; and his 1975 preview of that apology, "The Social Pork Barrel," Public Interest, no. 39 (Spring 1975), 27. 254 KENNETH R. HOOVER interestingthat Carlesonappearsamong the "unalloyed conservatives," and Stockmanin the "domestic conservative" category.27 As for President Reagan, he has referred to his philosophy as "libertarian," yet his positions reflect a mix of libertarianand traditionalistvalues.28 The president's economic policies seem to be libertarian,while his social positions are traditionalist.The cross-cut comes in the area of governmentalprogramsfor the poor. The safety net is recognized, thoughdegovernmentalizationof social responsibilityis encouraged.While a libertarianwould oppose the federalizationof Medicaid and AFDC, and a traditionalistmight federalize both in bare-bonesform, the New Federalismproposeda swap of one for the other at the federal level. Whatevertheir effect on the implementationof the New Federalism,these ideological differencesbetween libertarianand traditionalconservativeshave been less apparentthan the tactical flexibility of the Reaganadministrationin advancing its program. The result has been the creation of a form of New Federalismexpressed in budgetarypriorities, the apparentdenationalization of regulatoryfunctions, tax reductionsand the consolidation of some social welfare programs into block grants. As the effects of these moves on the position of the poor, in particular,become evident, the libertarianideological initiativebehind the structuralreform agenda of the New Federalismwill be tested and evaluated. THE IMPACT ON THE POOR The New Federalismhas already altered greatly the equation of "who gets what, when, and how?" The issue of inequalityand its implicationsfor the opportunitystructureis the point of collision between liberal capitalism and conservativecapitalism, in either its libertarianor traditionalistvariant.Consequently, any evaluation of the prospects of conservative capitalism must take account of the economic impacts of the policies so far enacted. While such an assessment is largely outside the scope of this article, there are general indicatorsthat these policies have worsened the patternof inequality in Americansociety. Ourpurposein reviewing this evidence is to suggest that the results are such that libertariangoals have not been achieved, while traditionalistfears have been reinforced. 27 John Kessel, "The Structuresof the ReaganWhite House," AmericanJournal of Political Science, 28:2 (May 1984), 235-36. In his memoir, Stockmanvariously describes himself as an "intellectual conservative" and a "social idealist" who thought supply-side economics along with a rationalizationof means-testedentitlementscould genuinely help the poor-he was intent on using libertarianmeans for traditionalistends (p. 40). Cf. Daniel PatrickMoynihan, "Political Aids," TheNew Republic (May 26 1986), 18. He finally had to acknowledgethat a tax increase was the only way out if equity was to be served, a position thatseparatedhim from thoroughgoing libertarianssuch as Donald Regan, then secretaryof the treasuryand now White House chief of staff; Stockman, Triumphof Politics, 347-48, 363-64. 28 Cannon, Reagan, 194. RISE OF CONSERVATIVE CAPITALISM 255 The greatestconcentrationof analysis has gone into detailing the impactof the New Federalismprogramson levels of economic inequality. These distributivemeasures can be viewed as indicatorsof opportunityas well as of outcomes. For the poor, benefits, taxes, and income form the matrix within which educational, social, physical, and even psychological opportunityare largelydefined. For the rich, by the termsof supply-sideeconomics, these are the measures of investment potential. Budget Cuts and Tax Changes Substantialcuts in federal assistancefor the poor were a notablefeatureof the Reagan program.A numberof these cuts affected federal relationshipssince they could have been replacedby state-basedprograms.Few cuts were made up in this way. As RichardNathanpointed out, "these cuts fell most heavily on one group, the so-called workingpoor, made up primarilyof female heads of householdand their childrenliving on a combinationof earnedincome and welfare."29 Budget cuts and program changes in the safety-net programs alone meant that the federal government expenditure per capita for poor people fell from about $1,700 in 1980 to $1,575 in 1983, a 7.3 percent decrease.30 While the cuts were substantial,they were considerablysmallerthanoriginally proposed by the Reagan administration.In its first major budget initiative, the administrationproposed cutting "human capital" programsby nearly 40 percent. Congress agreed to cuts averaging 23 percent.31 The AFDC was slated to increase by 9.8 percent; a cut of 28.6 percent was proposedby the Reagan administration;and Congress enacted a 14.3 percent decrease. Food stamps were targetedfor a 51.3 percentcut; Congressaccepted a 13.8 percent reduction. The most dramaticexample was the Women, Infants,and Childrenprogram;a proposedcut of 63.6 percentbecame, in the hands of Congress, a 9.1 percent increase.32 Because the changes were made in the midst of a recession, they had a particularlyburdensome impact on the poor. In a strong economy, it was estimatedthat the independenteffect of the Omnibus Budget Reconciliation Act (OBRA) welfare programchanges would have increasedthe povertylevel by 2 percent (557,000 people, of whom 300,000 are children).33Advancing 29 RichardNathanand Fred Doolittle, "Reagan's SurprisingDomestic Achievement," Wall Street Journal, 18 September 1984, p. 28. 30 John Weicher (AmericanEnterpriseInstitute), "Welfare 'Reforms' Will Stick," Chicago Tribune, 16 August 1984, p. 27. The presidentindicatedthat total spendingon the poor went up during his administration,but that was the effect of the recession on the size of entitlement populations. 31 D. Lee Bawden and John Palmer, "Social Policy," in The Reagan Record, John Palmer and Isabel Sawhill, eds. (Cambridge,Mass.: Ballinger Press), 204. 32 Ibid., 185-86. 33 U.S. Congress, House, Committee on Ways and Means, Effects of the OmnibusBudget 256 KENNETH R. HOOVER the proposalin a period of deep recession meantthatthe impactwas additive. According to one study, the OBRA changes plus the recession increasedthe projectedpoverty populationby 7.6 percent as comparedwith a 5.7 percent increase attributableto the recession alone.34 Various alterationsin the tax laws resulting from the Reagan administration's over-all tax cut were particularlyhard on the poor. The federal tax burdenfor a poverty-level family of four changedfrom a $134 refundin 1978 to a $285 payment in 1982, and a $383 payment in 1985. Prior to these changes, the tax thresholdwas $1,000 above the poverty line for a family of four; by 1986, the thresholdwas to have fallen to $2,500 below the poverty line. The tax burdenwas increased by the additionalimpact of increases in state and local taxes to compensate for federal revenue reductions.35The distributionof the tax cut was sharplyunequalin its effect on dollars retained by the taxpayer.The tax cuts added amountsrangingfrom nearly nothing for the less-than-$10,000 bracket, to about $1,500 for those in the $20,000$40,000 bracket, to more than $8,000 for those with incomes larger than $80,000.36 Income Distribution While it can be argued that the New Federalism initiatives should be distinguishedfrom changes in tax policy, the fact is that, for purposesof analyzing shifts in the opportunitystructure,they were both partof the revolutionin federalrelationsthat Reaganenvisioned upon takingoffice. The most significant impact, for purposes of the ideological debate, was that the distribution of income was made more unequal. According to 1984 Census Bureau data, the bottom 40 percent of the populationhas lost ground in median income since 1980 with respect to the top 40 percent (-$477 and +$1,769, respectively).37A staff reportof the CongressionalJoint Economic Committee (November 1985) found that the real income of families with childrenhas been especially hardhit: The lowest quintile lost 23.8 percent in mean income from 1979 to 1984. Losses to the Reconciliation Act of 1981 (OBRA) Welfare Changes and the Recession on Po'verty, Committee Printfor the Subcommitteeon Oversightand Subcommitteeon Public Assistance and Unemployment Compensation, 98th Cong., 2d sess. (Washington, D.C.: GPO, 25 July 1984), Table A, p. x. 34 Ibid., 12. 35 Center on Budget and Policy Priorities, Washington, D.C., "Taxing the Poor" (April 1984). 36 CongressionalBudget Office projections,February1983, cited in "The CombinedEffects of Major Changes in Federal Taxes and Spending Programssince 1981," staff memorandum, April 1984, preparedby the staff of the HumanResourcesand CommunityDevelopmentandTax Analysis Division of the CongressionalBudget Office, Table 3, p. 7a. 37 Newsweek, (9 September 1985), 24. This is the lowest percentagerecordedfor the bottom 40 percent since the Census Bureaubegan collecting this data in 1947. RISE OF CONSERVATIVE CAPITALISM 257 three middle quintiles were 14 percent, 10.5 percent, and 3.2 percent, with a gain to the top quintile of 1.5 percent.38 These shifts bear out the directionof the projectionsgeneratedon the basis of modeling reported by John Palmer and Isabel Sawhill in August 1984. According to the Urban Institute's simulations of the impact of Reagan's policies, the lowest quintile was to lose 7.6 percentof its income, and the top quintile stood to gain 8.7 percent. While some redistributionwould have taken place because of the recession, the Reagan policy increased the inequality of the redistribution.When measured against the Urban Institute's alternative,more conventional policy model, the Reagan policies added 1.6 percentagepoints to the gain of the top quintile, and increasedthe loss of the bottom quintile by an additional4.1 percent.39 The continuinghigh levels of povertyplace the justificationof furtherNew Federalistinitiatives in doubt. While libertarianconservatives may be reassured by the degovemmentalizationof some areas of policy and regulation, traditionalconservatives in Congress and the media have evidenced signs of restlessness over the increasinglydifficult position of the poor. The devastation of the black family and the feminizationof poverty generally has placed increasingnumbersof children below the poverty line. The poverty rate for black children (51 percent) is the highest it has been in fifteen years. Meanwhile the trickle-downeffects have been scatteredand contradictory at best. The percentage of the population living below the poverty line has declined slightly (from 15.3 percent to 14.4 percent), but there are still six million more people living below the poverty line now than there were in the late 1970s. Unemploymenthas declined somewhat, but remainson a plateau higher than for any previous recovery. The congressional Office of Technology Assessment studiedthe fate of displaced workersin the period 197984. Only 60 percentfound new jobs and nearly half of them took pay cuts.40 The savings rate, which was supposed to rise in consequence of the tax cuts and supply new investment in jobs, has instead fallen to the lowest levels since the early 1950s.41 The assessment of the success of the initiatives of the first term of the Reaganpresidency must be that what has been accomplishedis a form of de 38 U.S. Congress, Joint Economic Committee, "Family Income in America," staff report, 99th Cong., 1st sess. (28 November 1985), Table I, p. 4. 39 MarilynMoon and Isabel Sawhill, "Family Incomes:Gainersand Losers," in Palmerand Sawhill, The Reagan Record, 329, Table 10.5; 333, Table 10.6. 40 Kenneth Noble, "Study Finds 60% of 11 Million Who Lost Jobs Got New Ones," New YorkTimes, 6 February1986, p. 1. Noble reportsthat "the study said a large proportionof the displacedworkerswere middle-agedpeople in manufacturing'with long and stablejob histories,' ratherthan young people who change jobs often," and estimated that the programinstitutedin 1982 to deal with displaced workers reached no more than 5 percent of them. 41 Robert Hershey, "Savings Take a DramaticSlide," New YorkTimes, 3 November 1985, sec. 4, p. El. 258 KENNETH R. HOOVER facto New Federalismthat could be reversed throughchanges in budgetary priorities.42While very great changes took place, it is not at all clear that the foundationsfor a permanentstructuralchange were securedthen, nor are they likely to be secured in the second term. The 1984 elections produceda majorvictory for the president, but not for his party in Congress. The president's supportamong governorsof his party as well as congressionalRepublicansdeclined markedly.The NationalGovernors' Association, in its 1986 reporton "Federalismand the States" rejected out of hand the president's stated intention of turningmore federal responsibilities back to the states without the funding to supportthem.43The eliminationof the state tax deduction, which would have had many effects similar to those envisioned by the New Federalism,was droppedfrom the tax reform bill at the insistence of congressmen and senators from both parties. The Senate Budget Committee, notwithstandingits Republican majority, summarilyscrappedthe president'sbudget in early 1986 because of criticismover the damage done to domestic priorities. The drive towarda comprehensiveNew Federalismis stalled in good part because of profoundpolitical and ideological disagreementswithin President Reagan's own ranks. While the separationof ideological motivation from political prudencecan never be entirelyclear, we can shed additionallight on the role of ideology by comparingthe Reaganadministrationwith the government of PrimeMinisterMargaretThatcherto see if the same fault lines appear within the British version of conservative capitalism. "THATCHERISM" CAPITALISM AND THE EMERGENCE OF CONSERVATIVE IN BRITAIN MargaretThatcherand RonaldReaganemerged as leadersof their partiesin a roughly similar manner. Staking their claims to party leadership on the groundsof turningtowarda purerform of conservatism,both gatheredpower in the 1970s as their own parties failed to deliver new ideas and policies to cope with inflationaryeconomies and rising levels of discontent. Similarly, in both cases the opposition partycame to grief in trying to appease a coalition whose demandscould not be met amidstthe oil shocks, inflation, high interest rates, and increasingunemploymentof the 1970s.44Their victories were less the result of a mandatefor change than of a mandateto do something other than continue the currentdrift. MargaretThatchercame to power in a bitter intrapartystruggle for lead42 See U.S. Advisory Commission on IntergovernmentalRelations, Significant Features of Fiscal Federalism, 1984 Edition (Washington,D.C.: A.C.I.R., 1984). Cf. KennethPalmerand Alex Pattakos, "The State of AmericanFederalism:1984," Publius, 15 (Summer 1985), 1-17. 43 "Federalismand the States 1986," reportissued by the National Governors' Association (Washington,D.C.: National Governors' Association, February1986), 14. 44 See Samuel Beer, Britain against Itself: The Political Contradictionsof Collectivism(New York: Norton, 1982), 64-75. RISE OF CONSERVATIVE CAPITALISM 259 ership in 1975 following the defeat of Edward Heath. The way had been preparedby the challenges laid down by Enoch Powell on the immigration and social expenditure issues-a rough parallel in British politics to the welfare issue (with its racial overtones) in the United States.45These views were joined with those of Keith Joseph, the intellectual force behind monetarism, and Thatcher became the standardbearer when both Powell and Joseph founderedon accusations of racism.46 In both cases there were elements of a middle-class revolt against socialwelfare programs coupled with high levels of taxation. By striking these chords, both Reagan and Thatcherwere able to use middle-classpopulism as a recourse against the upper-class images of their parties. In practice, the economic policies they advocated benefitted the upper classes materially. The Heathgovernmenthad tried and failed to breakout of the conventional mold established by the Labour Party, and this allowed Thatcherto attack both the principlesof the Heath leadershipand his practicalhold on the party establishmentwith its traditionalistcadre in Parliament.As Milton Friedman pointedout, "the thing that people do not realize is that MargaretThatcheris not in terms of belief a Tory. She is a nineteenth century Liberal. But her party consists largely of Tories. They don't really believe in free markets. They don't believe in free trade. They never have as a party."47Though the Reagan and Thatchergovernments each arrived at power by playing upon somewhatdifferentideological combinations,they are both heir to the natural strainsbetween libertarianand traditionalistideology. In the Thatchergovernment, there are a numberof examples of that tension. One of the sources of her rise to power was the criticism of Prime MinisterHeath's nationalizationof the Rolls-Royce company and his support for statutorycontrol of wages and prices. While both of these positions could be justified by traditionalistconcerns for maintainingthe "ensemble" of the basic forces in the society, they are anathema to libertarians.There were similarconflicts between the Heath and Thatchercoteries over social-welfare issues.48 Sir Keith Joseph, apostate from MacmillaniteToryism and founderof the ConservativePartyCentre for Policy Studies, took the lead for British libertariansin simply denying that society was responsiblefor inequalitiesbetween people (thus living up to Robert Behrens description of the Diehards as "sociology-baiters").49What was not caused by society cannot be corrected 45 Ibid., 177-78. 46 Robert Behrens, The ConservativeParty in Opposition, 1974-1977: A Critical Analysis (Coventry:LancasterPolytechnic, 1977), 13-15. 47 Quoted in Raymond Plant, "The Resurgence of Ideology," in Developments in British Politics, Drucker, ed., 13. 48 Cf. Behrens, Conservative Party, 14-17, 74. 49 Nick Bosanquet, "Social Policy," in Developmentsin BritishPolitics, Drucker,ed., 168- 69; re Behrens, see his "Diehards and Ditchers," 286. 260 KENNETH R. HOOVER by governmentintervention.It is in this propositionthatthe divide is reached. Traditionalistsargue that, far from excusing itself from responsibility for social inequality, it is the function of governmentto intervene precisely to maintainthose inequalitiesthat are essential to some imagined orchestration of forces in society. For example, when Prime MinisterThatcherproposedto eliminatethe indexing (to inflation)of children'sbenefits, she had to face the opposition of, among many other groups, the Conservative Women's National Advisory Council. These conflicts over government responsibilityfor the plight of indigent individuals are perhaps the most obvious expression of the traditionalistlibertariansplit. There are, however, other differences apparentin British conservative politics that may have equally profound consequences for the futureof conservativecapitalism generally. Elites versus "The People" Traditionalconservativeshistorically have been suspicious of democracy. In an indirectfashion, promarketideology is an intellectualcoconspiratorin the rise of democraticattitudesand practices in the workplace-a development deeply threateningto traditionalelites. Ralph Miliband, writing in 1978, identified a process termed "de-subordination" in British life: De-subordination meansthatpeoplewhofindthemselvesin subordinate positions,and notablythepeoplewhoworkin factories,mines,offices,shops,schools,hospitalsand so on do what they can to mitigate,resist and transformthe conditionsof their is most evidentand felt, subordination. This processoccurswheresubordination andat theworkplacein general;butalsowherevnamelyat the "pointof production" er else a conditionof subordination exists,for instanceas it is experienced by women in the home,andoutside.50 Both Miliband and Samuel Beer, who notes a similar phenomenon as a "decline of deference," observe that this has contributedto the downfall of the "civic culture."51While both argue that this developmentis the product of democraticreformism in the political sector, it is also the case that the consumerismof the marketplaceleads to a democracyof expectation, a faith in mobility, and an appetite for gratificationthat is unsettling to the established order and to its mission of instilling the virtues of self-discipline that make the "civilized life" possible.52The disintegrationof family structureis widely attributedto the pressuresof the marketpsychology.53 50 Ralph Miliband, 'A State of De-Subordination,"British Journal of Sociology, 29:4 (December 1978), 402. 51 Beer, Britain against Itself, 194-97. Cf. William Harbour,The Foundations of Conservative Thought(Notre Dame: University of Notre Dame Press, 1982), 185. 52 This is a problemthat Adam Smith was vaguely aware of, but did not address. See Martin Camoy, The State and Political Theory (Princeton:PrincetonUniversity Press, 1984), 29. 53 See Charles Leathers, "Thatcher-ReaganConservatismand Schumpeter's Prognosis for Capitalism," Review of Social Economy, 4:1 (1984), 28-29. RISE OF CONSERVATIVE CAPITALISM 261 Libertariansare party to radical democracy throughtheir advocacy of the marketand of populist political initiatives to "returnpower to the people." Theirrole as carriersof the democraticcreed is significant, althoughit is quite distinctfrom the romanticsof the Left and theircommunity-basedconception of directdemocracy.54However, the combinationof libertarianand romantic tendencies has made the movement toward democracy all the more powerful-and ultimately all the more threateningto traditionalistvalues. This combinationhas some conservativeintellectualsworried. Escalatinglevels of aspirationand expectation have created a "rising tide of entitlement" that threatensthe Westernway of life. For conservativecapitalists, the solution is to limit the expansion of democracy-not to restrainthe market.55 Traditionalistshave a proprietaryinterestin the civic culturewhich, though it has elements of liberal rationalismin its British version, heavily favors the prescriptiverole of the upper classes. The complaints of libertariansabout traditionalistfoot-draggingon Thatcher'sprogramhave resultedin open hostilities. Sir John Hoskyns, a libertarianpartisanand head of the Prime Minister's Downing Street Policy Unit, accuses the traditionalelite of "a proprietorialfeeling towards the country as a whole, almost as if it were an estate of which they were the benevolent owners."56 More serious was Sir Keith Joseph's attemptto reduce grants to university students which nearly threatenedthe continuance of the Conservative government's majority in Parliament.57To strike at the funding of education was to threatenthe most revered institutionalbasis for conveying British civilization and culture. Traditionalist Pragmatism versus the Rationality of the Marketplace Aside from the conflicts over the role of the elite, libertariansand traditionalists differ as to the role of reason in human affairs. Burkean conservatism was founded in a revolt againstthe rationalistassumptionsof Lockean classical liberalism. While both libertariansand conservatives place strong limits on the reach of the social contract, the libertarianshave their own version of the rationalistfaith: a doctrinairebelief in the marketplaceas the ultimatesocial institution.The marketplaceas a cipher for self-interestin the making of choices is the centerpieceof a whole architectureof social-choice 54 Beer, Britain against Itself, 126-31. Cf. Richard Vigurie's mix of libertarianismand populism in The Establishmentvs. the People (Chicago: Regnery Gateway, 1983). 55 Frances Fox Piven and Richard Cloward, The New Class War (New York: Pantheon, 1982), 23. Cf. Alford, "Reagan Budgets," in Future of AmericanDemocracy, Kann, ed., 4748, on Daniel Bell's argumentof the same kind; and Samuel Beer's argumentabout "pluralist stagnation" in Britain, Britain against Itself, 100-101. 56 John Hoskyns, "ConservatismIs Not Enough," Political Quarterly, 55 (January-March 1984), 10-11. The government is also criticized by the libertariansfor being "inadequately radical." See Hugh Thomas (chairmanof the (Conservative)Centre for Social Studies), "The Fruitsof Conservatism," New Society, 67:13 (1984), 435-36. 57 David Walker, "ThatcherFaces Revolt on StudentAid," The Chronicleof Higher Education, 3 (3 December 1984), 1. 262 KENNETH R. HOOVER theory. It is precisely the doctrinaireclaims of the libertariansfor the rationality of the marketplacethat traditionalistsdistrust. RobertBehrens argues that rationalismdoesn't really divide conservatives from nonconservativestoday since both versions of conservatismhave more than a sufficiency of doctrine.58 However, there appears to be something qualitativelydifferentin the subjectivepragmatismof the traditionalistswhen compared with the objective-sounding economism of the libertarians.The claims made by libertariansfor the power of the unrestrainedmarketin the setting right of inequities are elaborate. The unfetteredmarketis to remove the blight of underdevelopment,solve the problem of welfare dependency, lead to more disciplined personalbehavior, and stimulatethe modernization of industry.59 Many of these goals are includedin the traditionalistprogram;the problem is thatthe markethas its own logic, and it is independentof elite judgmentand control. There is no inherentprotectionof the values of "theocentrichumanism" or of the customarymores and preferencesthat form the core of traditionalist belief.60 As ArthurAughey points out, "there is no necessary correlation between an economic system based on free enterpriseand market relationsand a cohesive community. Conservatismpresupposesa community, one nation, exhibiting 'differences' but not to the extent of irreconcilable conflict. Society must be conscious of itself as a whole, it must have a common sense of identity."61 One of Thatcher'sclosest calls in Parliamentcame in the summerof 1985 over the issue of raising the salaries of top governmentexecutives. The logic of the marketplacedictated that the best talent could not be had without substantialincreases. A regard for the restraintshown in the pay policy for teachers,nurses, and lower-level civil servants,as well as the conditionof the country generally, led forty-eight Conservative members of Parliamentto defect. One Tory from the West Country remarkedthat the government should behave "with a little more sensitivity, a little more humility, and a little less arrogance."62 Part of the difficulty of implementing a rationalistdoctrine in complex 58 Behrens, ConservativeParty, 17-18. 59 For a sampling of these claims, see W. H. Greenleaf, The Rise of Collectivism, Vol. I of The British Political Tradition (London: Methuen, 1983), 161-63; Behrens, "Diehards and Ditchers," 286-95. 60 William Harbour,Foundationsof ConservativeThought, 186-87. Cf. Beer's citationof the sentimentof a prominentTory M.P. of traditionalistbackgroundthat "political advice, derived from liberaleconomic theory . . . leaves governorsand its own adherentsalways frustratedat the distance between their model of the world and reality," in Britain against Itself, 173-74. 61 Philip Norton and Arthur Aughey, Conservatives and Conservatism (London: Temple Smith, 1981), 285. 62 Quoted by R. W. Apple, "Thatcher Barely Escapes Defeat as 48 Conservative M.P.s Rebel," New YorkTimes, 24 July 1985, p. 4. RISE OF CONSERVATIVE CAPITALISM 263 governmentalstructuresis that the results are often internallycontradictory. For the Reagan administrationlibertarians,their credo dictated a devolution of federal responsibilitiesto state and local governments. This was to serve the populist aim of returningpower to the people, as well as the market argumentthat such local authoritieswould compete to reduce social services in the effort to attractnew investment. To the extent that the initiative was implemented, what resulted was an increase in confusing and contradictory forms of state regulation and service financing and, very probably, a less efficient environmentfor economic growth.63 In Britain, the controversyover center-localrelationstook similarly peculiar twists. Promises of devolution were quickly subordinatedto the need for tight control from the center over local social spending in orderto serve the fiscal entailmentsof monetarism.64In both countries, the patternappearsto be that the structuralaspects of the libertariandoctrine generally lose out to the imposition of class-based policy preferencesfrom the top.65 Thatcher's increasingly severe troubles in the House of Lords provide furtherillustrationsof these tensions. In surveying ten major defeats for the governmentin the period 1979-84, Donald Shell points out thatConservative peers seem reluctantto acquiescein the new ideologicalconservatism; instinctivelythey preferthecautiousapproachto changewhichsees the needto makeexceptionswhen newpoliciesareinvoked,andwhichis sensitivein a paternalistic wayto thedelicate socialfabricMrs.Thatcherseemsreadyto destroy.66 Institutionalismversus Free Enterprise Traditionalconservativeshave differentpreferencesin institutionsfrom libertarians. Traditionalistsprefer institutions such as the church and the family that are customary in character and hierarchical in organization. Traditionalistswho look beyond the temporarygains the marketbrings to elites see a world in which society is turned over to the pursuits Hobbes foresaw in 63 Susan Tolchin and MartinTolchin, Dismantling America: The Rush to Deregulate (New York: Houghton Mifflin, 1983), 255; cf. "State Regulators Rush in Where Washington No Longer Treads:Will the New FederalismCreate a Fifty-HeadedHydra?" Business Week, (19 September 1983), 124. 64 PatrickDunleavy and R. A. W. Rhodes, "Beyond Whitehall," in Developmentsin British Politics, Drucker,ed., 126-128. RobertBehrenspoints out thatantidevolutionistswere generally found on the free marketside, though there were exceptions. See ConservativeParty in Opposition, 19-20. 65 Timothy Conlan, "Federalism and Competing Values in the Reagan Administration" (Paperpresentedat the Annual Meeting of the American Political Science Association, Washington, D.C., September 1984), cites ten cases where structuraldevolution lost out to Reagan's prescriptivepolicy goals. Cf. Alfred Light, "Federalism, FERC v. Mississippi, and Product Liability Reform," Publius, 13 (Spring 1983), 85-96. 66 Donald Shell, "The House of Lords and the ThatcherGovernment," ParliamentaryAffairs, 38 (Winter 1985), 16-32. 264 KENNETH R. HOOVER Leviathan:a "restless desire of power afterpower," drivenby the realization that the individual "cannot assure the power and means to live well . . . without the acquisitionof more."67 To counterthis trend, traditionalistshave arguedfor an active role on the partof institutionsto moderateand balanceexcesses by attendingto the needs of variousstrataof the population.As RobertBehrenshas observedin characterizing the approachof Prime Minister Heath, it was the mission of conservatives to use "political skills to create a fresh balance between different elements and doctrines in society when their imbalance threatened social harmony. ... In time of undue individualism the party might defend the state, yet in times of state authorityand socialism, it would champion the individual. Confronted with the question: 'What will you conserve?', the [traditionalist]response was an unabashed, 'That depends.' "68 Libertariansare repulsedby any such notion. Traditionalinstitutionsare the problem,not the solution. It was Heath's "corporatist"attemptto involve the Confederationof British Industriesand the Trades Union Congress in economic policy making that Sir Keith Joseph objected to in the 1970s. The breakingof the miners' strike provides another illustration,as does the anguished response of Harold Macmillan on behalf of the organic view of society. The revolt of the party traditionalistsagainst the libertariansbecame sufficiently widespreadthat a splintergroup of thirtyM.P.s, named Conservative Centre Forward, was briefly formed (May 1985) to challenge Thatcher's policies in Parliament.The movementwas led by Sir FrancisPym, prominent spokesmanfor moderatecentristToryism and formerCabinetmember. Pym juxtaposed the doctrine of laissez faire with Marxism as the extremes of British politics-arguing that Thatcher's economic blunders have been retrieved only by her Falklandssuccess and the ineptitudeof her opponents.69 The government's weakening position in the Commons and the Lords is part of a pattern that found another traditionalinstitution, the Church of England, becoming openly critical of Thatcher'seconomic policies. A report issued in December 1985 by the Archbishop of Canterburydenounced Thatcher'seconomic policies for increasingthe gap between rich and poor, and failing to consider the moral issues behind economic policy.70 There are movements similar to the American moral majority in Great 67 Thomas Hobbes, Leviathan (London: Penguin, 1970), 1-2. 68 This is a more dynamic conception of traditionalconservatism than Samuel Huntington finds in the Americanversion, where the traditionalistis seen more simply as 'one who standsby establishedinstitutions." Samuel Huntington, 'Conservatism as an Ideology," AmericanPolitical Science Review, 51:2 (June 1957), 470. 69 Francis Pym, The Politics of Consent (London: Hamish Hamilton, 1984). Cf. William Keegan, Mrs. Thatcher's Economic Experiment(London: Allen Lane, 1984), on the doctrinal infighting. 70 Joseph Lelyveld, "ThatcherGovernmentUpset over a CriticalChurchReport," New York Times, 2 December 1985, p. 1. RISE OF CONSERVATIVE CAPITALISM 265 Britainthat advocate bolsteringthe family, disciplining sexual behavior, and advancing the agenda of the church. There are some tentative linkages between such groups as the Listeners' and Viewers' Association, which promotes increasedmedia censorship, and such traditionalistpolitical formations as the Monday Club and the Salisbury Group. That these initiatives have taken second place to economic and internationalpriorities has resulted in some clear expressions of dissatisfaction on the part of the moral traditionalists with Thatcher-as with Reagan.71 In dealing with these internal tensions, both governments have survived moreoften by waffling thanby implementingone policy at the expense of the other. As Robert Behrens remarks, "Mrs. Thatcher's particularskill lay in flying a Diehard [libertarian]kite and then carrying on, leaving policy unchangedor merely adjustedat the margin.'72 Similarly, Reagan's occasional declarationsof loyalty to the libertariancreed have not preventedhim from backingoff the programwhen oppositionbecame too strong, as in the repeated flirtationwith cuts in Social Security. CONCLUSION To returnto the comparisonof conservativecapitalismand liberalcapitalism, Bowles and Gintis arguethatthe latteris a spectrumof procapitalistresponses to the naturaltendency of capitalism to erode.73 Rather than being tied to liberalcapitalismas an ideal type, they see it in Marxistterms as a bundle of relationsinteractingdialecticallyand changingover time. Fromtheirperspective, the extendedfight over the level and form of subsistencerightsillustrates the process. Yet reducingthese tensions to the languageof "dynamics" and "contradictions"runsthe dangerof obscuringthe distinctionsthat are clearly evident in the policy initiatives that have been taken by the Thatcher and Reagan governments. The question then is, when does it become useful to distinguish conservative capitalism from the liberal version? Perhaps when the objective changes from haltingerosion to advancingthe main formation.Libertarianism isn't one more attemptto have the governmentsupply palliatives to a sickly system; it is an effort to dispense with the doctor and declare the patient healthy. The aim here is to bring into being a new consensus to displace entirelythe New Deal and Butskellism (the convergence of Labourand Conservativeprogramsunderthe leadershipof R. A. Butlerand HughGaitskellin the 1950s and early 1960s). What the admixtureof elements of traditionalismillustrates, however, is 71 MartinDurham, 'Family, Morality, and the New Right," ParliamentaryAffairs:A Journal of ComparativePolitics, 38:2 (Spring 1985), 180-91. 72 Behrens, Conservative Party, 118. Cf. "Thatcher's Answer to Deficits: Tax!" George Will, Los Angeles Times, 30 September 1983, sec. II, p. 7, col. 1; and Peter Riddell, The ThatcherGovernment(Oxford: Basil Blackwell, 1984). 73 Bowles and Gintis, "Crisis of Liberal Democratic Capitalism," 61-64. 266 KENNETH R. HOOVER thatthis is a movementwith an uncertainfuture. Just as the reformliberalism of the New Deal drew upon a combinationof ideological tendenciesincluding socialism, progressivism,and populism, so conservativecapitalismhas more thanone camel in its tent. Andjust as liberalcapitalismfounderedon the costs of placatingits middle- and lower-class constituencieswhile at the same time maintaininga competitive economy, so conservative capitalism encounters the collision between the immediateinterestsof its traditionalistbackersand the policy dictates of the free market.It is this inbuilttendency of the market to disruptpolitical formationsthat invites furtheranalysis. Politics relies heavily on class interests expressed as ideology; yet the marketplaceis no observerof prescriptivevalues. Insofaras they endorse the marketplace,both liberal capitalism and conservative capitalism ultimately separatethemselves from the self-interestof individualclass members even while advancingAdam Smith's version of the generalinterest.There is, after all, a difference, to use Smith's terms, between what vanity seeks (whetherof the upper-, middle-, or lower-class variety) and the "general interest of the society" in improvingits productivity.The marketoperatesso as to favor the latter, while the ideology of the marketdraws people in throughan appeal to the former. While defenders of the market appreciateits apolitical characteristics, and accountthem as assets in the struggleto allow people to be "free to clhoose," these characteristicsmake promarketideology a perfidiouspartner in any electoral coalition. Reform liberals and social democratsdiscovered in the seventies that the welfare state as an answer to capitalism's inequalities works well enough when there is growth to finance real opportunityfor the middle class. Prosperity allows vanity and conscience to be served simultaneously. When resourcescontractand the business cycle goes awry beyond the curativecapacity of the milder forms of Keynesian intervention, then the politics of the welfare state divide the middle and lower classes.74 In the United States, the majorityturn into tax rebels suspicious of the claims of the poor, and the special interestsclamor for competitive position. As Andrew Gamble points out in the British context, the trade unions become the scapegoats and the inability to break away from the internationalmarket system dooms the chances of maintainingthe customarypatternsof rewardwithin British society.75 Amid the insecurities of the downturn, as Rousseau might have predicted, politics becomes a seeking for mass reassurance,and the real interests of the dominantclass provide the policy agenda. In the eyes of many critical theorists, the rebirthof conservativecapitalism 74 See LindaMedcalf and KennethDolbeare,Neopolitics (New York:RandomHouse, 1985), 50-51. Cf. KennethDolbeare, Democracy at Risk (Chatham,N.J.: ChathamHouse, 1984), xiixiii. 75 Andrew Gamble, Britain in Decline: Economic Policy, Political Strategy, and the British State (Boston: Beacon Press, 1981), 186-87. RISE OF CONSERVATIVE CAPITALISM 267 signals the failureof the "class compromise" thatrelied on economic growth along with moderatereformsto deal with inequalityby lifting up those on the bottom.76 To the extent that it is truly libertarianin policy, conservative capitalismalso means the disestablishmentof traditionalelites, the randomizing of cultural values, and the subordinationof all aspects of society to materialismand short-termself-interest.77As for the power of the marketto put the economy to rights, the presenceof competitiondoes not mean thatthe will and the resources are in place to meet the challenge. That (relatively restrained)forms of governmentinterventionin Britainfailed to produce an economic renewal doesn't mean that the market will. The fault may be in myriad other factors, not least the rigidities of the capitalist class itself.78 As conservatives advance the banner of the marketplacein the hope of restoringthe prospectsfor continuedclass preference,the logic of the market sorts throughits capitalistpatrons, enrichingmany, forcing out some, meanwhile destabilizing communities and disruptinglives. The freedom of selfinterestedchoice that capitalismoffers is not in the end congenial to a conservatismthatsees stabilityas necessary. Thus the advocacyof the marketbrings to the surface the kinds of tensions within conservative capitalism that we have seen here over income securityand social policy. However, these are the concerns mainly of conscience or of the fear of remote consequences. The real splits are felt when, as in Britain, industryis denationalizedand placed in the hands not of traditionalelites, but ratherof internationalcapitalists holding little or no loyalty to nation, class, or the otherties of custom, mutual interest, and association that organize conventional politics. Thus Mrs. Thatcher'smost profoundcrises to date have involved sales of British concernsto Europeanand Americanconsortia-consistent with marketlogic, violative of traditionalsentiment. MeanwhileReagan has floated massive deficits throughforeign borrowing that has underminedthe value of the dollar and broughtwith it the displacement of customarycommercialand industrialrelationsin communitiesacross the country.79Farmers,businessmen, and small manufacturers,whose inter76 This is the general argument of Bowles and Gintis, Adam Przeworski, and Immanuel Wallerstein and others. Cf. Helene Slessarev, "Two Great Society Programs in an Age of Reaganomics" (Paper presented to the Midwest Political Science Convention, Chicago, April 1984), 3-5. 77 Cf. British traditionalistRoger Scruton, The Meaning of Conservatism (Totowa. N.J.: Bares and Noble Books, 1980), 127-28, and American traditionalistRussell Kirk, "The Problemof Community," in his A Programfor Conservatives(Chicago:Regnery, 1962), ch. 6, esp. 140-42. 78 This argumentis developed by Ben Fine and LaurenceHarrisin The Peculiarities of the British Economy (London: Lawrence and Wishart, 1985). 79 Accordingto FederalReserve Boarddata, the annualnet acquisitionof United States assets by foreigners has more than tripled in the period 1980-85. Cf. Andrew Gamble's distinction between "liberal political economy" and "national political economy" in Gamble, Britain In Decline, 133 et passim. 268 KENNETH R. HOOVER ests are historicallyat the heartof the RepublicanParty, have watched speculatorsprofit while their own positions are ever more effectively challenged by increasing internationalcompetition, giant mergers, and even foreignbased takeovers.The loss of supportfor Reaganand Thatcherin theirrespective legislaturescontinues even as the need for symbolic reassurancemaintains each leader's personal popularity. For the present, the hybridof conservativecapitalismallows conservatives to presentthemselves both as defendersof the past and as modernizers,while casting those on the Left off as failed deviationists.80That, and the palpable gains for the incomes of the traditionalelite, keep the movement in motion even while the traditionalistelement of its ideological base appears to be eroding. The capacity of ideologies to provide an anchor for class identity through myths concerning "ensembles"-or "exploitation"-based on class differencesconfronts, in moderncapitalism, a force fundamentallyindifferentto the continuityof personal identity.81While socialists and progressives provided liberal capitalisma scenario for the preferredidentity of the reformers and the disadvantaged,traditionalistshave given to conservativecapitalisma sense of class identificationwith the establishment.Capitalism,by promoting entrepreneurshipas the only truly legitimated role, celebrates a transitory figure ever at risk of displacement-thus underminingits class alliances whenever it becomes too closely realized in policy. Similarly, both liberals and conservatives have flirted with versions of populism as a way of recouping the supportof those dismayed by reformist do-goodism and elitism on the one hand, and economic royalism on the other.82 The "authoritarianpopulism" Stuart Hall observes in Britain is evident as the New Right in the United States. Yet politics is not alone a matterof identity, nor of hegemonic intent-the realitiesof economic results intrudein ways that mythology cannot conquer, though it surely can respond in powerful definitions of the natureof the problem. We have, of course, sketched only a few of the dynamics of identity and class in which ideology becomes both cause and effect in the context of capitalistpolitics. The intentionis to fill in a partof the largerpicturethat has been obscuredsince the twenties when conservatismenjoyed its last period of open ascendancy. 80 Cf. PatrickWright, On Living in an Old Country(London:Verso New Left Books, 1985). 81 For a fuller exploration of the relationshipsbetween identity and politics, see Kenneth Hoover, A Politics of Identity (Urbana:University of Illinois Press, 1976), esp. chs. 5, 6. 82 To use Stuart Hall's terms, there is a limit to how far the class-to-partynexus can be dissolved into a government-to-peopleconception without engenderinga reactionfor both economic and sociopsychologicalreasons. See Hall's thesis concerning "authoritarianpopulism" in "Moving Right," Socialist Review, no. 55 (1981), 113-37. Cf. Vigurie, The Establishmentvs. the People; Gamble, Britain in Decline, 145.